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Gaining Currency

April 2015

Islamic credit cards are gaining acceptance and are issued parallel to conventional credit cards, providing customers with an alternative investment philosophy

The emergence of a distinct Islamic Credit Card is a natural progression in the growth of Islamic financial services industry that are governed by Shariah principles and transactions should be free from prohibited activities and elements such as riba (usury), maisir (gambling) and gharar (ambiguity). The cardholder need not necessarily have to be a Muslim to get a Shariah-compliant card.

How It’s Different

Islamic credit cards are conceptually different from conventional credit cards. Islamic credit cardholders are allowed to use the card only for shariah-compliant transactions and non-halal transactions incurred in bars, discos, night clubs and gambling are declined.


Generally, there are three groups of Shariah-compliant credit card arrangements available to customers.

  • The cardholder is provided a line of credit and a monthly or yearly usage fee tied to the outstanding balance of the line of credit.
  • The cardholder is allowed to buy an item with a card and, instantly, the bank purchases the item before selling it to the cardholder at a higher price.
  • A lease-purchase agreement where the bank holds title to the purchased item until the cardholder makes the final payment.

Gaining CurrencyTerms and fees of different types of Islamic credit cards can vary depending upon the financial institution as well as the region and the local competition. In general, with line-of-credit cards, a customer can expect to pay usage fees equal to 5 percent to 10 percent of the outstanding balance and with the other type of cards, a cardholder is usually required to maintain a deposit.

To qualify as Shariah-compliant, a financial institution must have an internal review board of experts in Islamic law to certify that the credit card conforms to Shariah principles. Despite their complexity, Shariah-compliant credit cards have more in common with their traditional counterparts.

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